Ch. 7/Study Guide - Assignment Problems 181 Problem 13 ITA: Division B, Mr. Richmond, a new client, has invested in rental properties, principal residences and other capital Subdivisions a, b, c property with inheritance monies and other liquid cash. He provides you with the following information with respect to his 2021 taxation year. Mr. Richmond is employed by Wealth Inc., a Canadian-controlled private corporation, and received the following income and benefits: (1) Salary (net) ...... . . ..... $ 52,986 Payroll deduction: Income taxes $23,861 CPP (includes enhanced CPP of $461) 3,500 EI .... . . . ... . 953 Registered pension plan (defined benefit: current service) ... .... . 3,700 060 32,014 $ 85,000 (2) Mr. Richmond paid professional fees of $500 to the Professional Engineers of Ontario. (3) Mr. Richmond sold two lots of his Wealth Inc. employee stock option shares. He provides you with the following: Ist lot - 450 shares sold on March 15, 2022, for $26.50 per share. These shares were exercised on February 2015 for $8. The fair market value of each share on the date exercised was $10.50. The fair market value at the date of grant was $8. 2nd lot - 600 shares sold on December 5, 2022, for $25 per share. These shares were exercised on April 12, 2021, for $15. The fair market value of each share on the date exercised was $21. The fair market value at the date of grant was $17. (4) Mr. Richmond received an interest-free loan of $9,000 on March 12, 2022, to enable him to purchase the 2nd lot of shares of Wealth Inc. The loan was outstanding until the shares were sold on December 5, at which time the loan was repaid. Assume that the prescribed rate throughout the year was 3%. CHAPTER 7 In addition, during 2022, Mr. Richmond received the following income from various sources including certain capital dispositions. (A) Mr. Richmond sold the following assets: Cost Proceeds Antique foot stool $1,100 900 . . . 950 Painting 1,500 250 850 Stamp collection . . . (B) During 2022, Mr. Richmond sold his two residences, in order to purchase a larger home in an expensive suburb. The following facts relate to these two residences: Date purchased Cost Commission Proceeds 2013 $95,000 $21,000 $350,000 City home . . . . . . . . 2008 15,500 12,000 200,000 Cottage . .. . . .. . . . 17,850Introduction to Federal Income Taxation in 182 () In addition to his residences, Mr. Richmond owns two rental properties. The following informa- tion pertains to these two properties: Wealthier St. Richmount St. $70,000 $100,000 $55,000 $ 80,000 Cost of land . . . . . $ 65,000 Cost of building . ....... ... . . . . $39,000 UCC - January 1, 2022, Class 1 . ..... $18,000 $ 7,600 Rental revenue in 2022 . ... . Expenses: $ 2,100 $ 1,800 Taxes (property) .. . . . . . ...... 4,300 6,100 Other expenses . . . . . . . . . 3,600 $ 0 Mortgage interest . . . . . . . . . . $10,000 $ 7,900 Ina asbuton) The Richmount St. rental property was sold in November for proceeds of $250,000 less $9,000 of selling costs. Of the proceeds, $140,000 was for the land. Mr. Richmond purchased the Wealthier St. rental property by placing a mortgage on his home. His monthly payments are $450 per month, of which $300 per month represents interest. (D) Mr. Richmond received dividends from the following investment: Wealth Inc. - a Canadian-controlled private corporation (from income taxed at the low corporate rate) .. . . $800 (E) Mr. Richmond owns units in Dumark Mutual Fund. He received a T3 slip from Dumark Mutual Fund indicating the following income amounts allocated to his account and reinvested in 2020: Capital gains . . . . . . . ... . Actual amount of dividends $1,200 Taxable amount of dividends 362 500 186 Mr. Richmond had invested $20,000 in the Dumark Fund in 2021. This resulted in the purchase of 1,640.824 units of the fund. In 2021, income of $46.31 was allocated to his account and reinvested. The reinvestment resulted in the purchase of 3.845 units at the market value of $12.044 per unit. The 2022 income allocation resulted, on reinvestment of the $1,544.97, in the purchase of 119.358 units at the market value of $12.944 per unit. Late in 2022, after the income allocation, Mr. Richm 1,000 units for a total of $12,881. (F) Mr. Richmond sold a $100,000 Government of Canada bond for $115,327. This bond paid interest semi-annually at an interest rate which was much higher than current interest rates. The bonds on the open market for $98,000. proceeds received of $116,327 included accrued interest of $5,327. Mr. Richmond had purchased the (G) Mr. Richmond has a listed personal property loss, carried forward from 2016, of $700. Mr. Richmond has asked you to calculate his Division B income for 2022. Assume that he claimed $60,000 of his capital gains exemption in prior years. Ignore the effects of any leap year. Problem 14 Tony is 59 years of age. Tony established and, for 34 years, successfully maintained Tony's Future Hardware, a proprietorship to rally. The business has a December 31 year end. Tony has come to you for tax advice on how to best structure the sale of all the assets, what after-tax cash from the same would be retained by him, and when he would pay the tax on the sale. Tony, a hard-working man, is looking forwar store chain, Nailem Inc. (which